According to JM Financial analysts, Brent crude could remain elevated at around $80 a barrel over the next 12 months, even as oil supply recovers. The brokerage expects the higher crude-price environment to favour upstream producers Oil India and ONGC, while retaining a 'Reduce' rating on oil marketing companies (OMCs) on valuation and earnings concerns. At a landed Brent price of around $101 a barrel, comprising Brent at about $91 a barrel and $10 a barrel in higher freight costs, the OMCs' weighted average auto-fuel integrated gross margin is estimated at Rs 9 per litre, which is Rs 3.5 per litre below the historical average of Rs 12.5 per litre.
JM Financial has retained a Buy rating on Oil India with a target price of Rs 560, citing the company's 15-20% EPS compounding story over the next three to five years. The brokerage highlighted the expansion of Oil India's NRL refinery capacity from 3 million tonnes per annum to 9 million tonnes per annum by the end of FY27E and the expected gradual ramp-up to 100% utilisation over two to three years. The company is experiencing robust crude output growth trend since Q4FY26, with crude output expected to reach 4 million tonnes in FY27E, compared with 3.45 million tonnes in FY26. Gas output is expected to rise to around 4 billion cubic metres by FY28-29E from 3.2 billion cubic metres in FY26.
JM Financial has retained its 'Reduce' ratings on HPCL, BPCL and IOCL with target prices of Rs 375, Rs 290 and Rs 135, respectively. The brokerage estimates that OMCs are making around Rs 4.5 per litre in EBITDA from auto fuel, Rs 3.5 per litre below the historical average of Rs 8 per litre. At a landed Brent price of around $101 a barrel, the OMCs' weighted average auto-fuel integrated gross margin is estimated at Rs 9 per litre, compared with the historical average of Rs 12.5 per litre. OMCs could earn a normalised auto-fuel integrated gross margin of Rs 12.5 per litre at a landed Brent price of around $95 a barrel, aided by a Rs 10 per litre excise duty cut by the government and a Rs 7.5 per litre fuel price hike.
JM Financial noted that large marketing losses in Q1FY27 resulted in a 19% decline in HPCL's consolidated book value to Rs 250 per share at the end of Q1FY27, from Rs 308 at the end of FY26. By comparison, IOCL and BPCL saw book-value erosion of 1% and 2%, respectively. IOCL's book value stood at Rs 154 per share at the end of Q1FY27, compared with Rs 155 at the end of FY26, while BPCL's stood at Rs 230 per share, against Rs 234 at the end of FY26. Based on Q1FY27-end book value, HPCL is trading at 1.48 times price-to-book value, BPCL at 1.38 times and IOCL at 0.9 times.
JM Financial has retained a Buy rating on ONGC with a target price of Rs 300. The brokerage expects the higher crude-price environment to favour upstream producers, with ONGC benefiting from the sustained elevated crude prices. The company's valuation and earnings profile support the positive outlook, though specific growth drivers and financial metrics were not detailed in the current analysis. The brokerage's preference for Oil India over ONGC appears to be driven by the former's more aggressive capacity expansion plans and operational improvements.
